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Industry Concentration, Knowledge Diffusion, and Economic Growth Without Scale Effects

  • Colin Davis

    ()

    (The Institute for Liberal Arts, Doshisha University)

  • Ken-ichi Hashimoto

    ()

    (Graduate School of Economics, Kobe University)

This paper develops a two region model of trade to study the relationship between geographic patterns of industry and economic growth without scale effects. With transport costs, imperfect knowledge diffusion, and perfect capital mobility, firms locate production, process innovation, and product development independently in their lowest cost regions, leading to the partial concentration of production and the full agglomeration of innovation in the region with the largest market. A rise in industry concentration increases knowledge spillovers from production to innovation, resulting in a fall or a rise in the level of market entry depending on whether productivity increases more for process innovation or for product development. As a result, the rate of economic growth may rise or fall, depending on the effects of industry concentration on market entry.

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File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2014/1408.pdf
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Paper provided by Graduate School of Economics, Kobe University in its series Discussion Papers with number 1408.

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Length: 30pages
Date of creation: Feb 2014
Date of revision:
Handle: RePEc:koe:wpaper:1408
Contact details of provider: Web page: http://www.econ.kobe-u.ac.jp
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